Taking Care of Elders

Four out of every ten Canadian baby boomers are paying an average of $498.00 per month to support their elderly parents according to a national survey conducted by a Canadian financial institution. Approximately 1/3 of Canadians who still have living parents are devoting the equivalent of a work week, approximately 42 hours, to other forms of support every month.

Many of those individuals assisting parents are also parents themselves hence the name “the Sandwich Generation”. Often this becomes a tiring and stressful role in one’s life. Care giving commitments can have a large impact on the financial plans of the boomer client. For some clients, eldercare costs and time away from work are putting a strain on the retirement savings plan. Even if our elderly parent is financially stable themselves, boomer children are spending additional funds which could be allocated to their retirement savings on travel expenses to visit their elderly parents and long distance phone calls. Another study in 2008 found that one in five boomers had to take time off work to help elderly relatives.

Boomers must re-examine their retirement dates and the lifestyles they envision in retirement. It is critical to discuss with elderly family members and your spouse topics such as care and end of life issues, wills, power of attourney and health care directives before a crisis occurs. “Boomers” Parents are often a very proud and private generation and they do not want to burden their children. Often the two generations do not communicate well about many of the above mentioned issues. A trusted financial advisor can often be of great help in this area and act as a resource to the adult children when needed. Why not plan a multi generation meeting with your financial planner.

Parents/seniors are often involved in financially helping their family and friends. A recent study showed that 64% of Canadians have loaned or borrowed more than $500.00 from friends or family. Loans need to be well documented in writing to avoid estate problem between other heirs. The amount of the loan, repayment plans, interest rate charged to the borrower and the repayment date of the loan are all necessary details to document. If the loan is forgiven at the lender’s death, how are other heirs compensated or not and where do the proceeds come from to equalize the estate for all heirs.

Joint ownership of assets with children or siblings has its challenges. Joint ownership is seen as a positive strategy as:

1.       There are no probate fees at the co-owners death

2.       Easy transfer of the co-owned asset at death and

3.       The co-owned asset is not part of the deceased’s will.

The disadvantages of joint ownership are

1.       The loss of 100% control over the co owned  asset,

2.       Possible triggering of immediate tax consequences such as capital gains or property transfer tax,

3.       Possible future tax consequences i.e. a principle residence is transferred to a child who already owns a home.

4.       Exposure of the co-owned asset to claims made against a joint owner from creditors or ex-spouses at the time of a marriage breakdown.

There is no one cookie cutter correct solution for all clients’ problems. Care and attention need to be taken to consider the pros and cons of joint ownership and the potential risk to all parties involved in a jointly owned asset.

Look before you leap. Be well informed, do your research and due diligence to make sure you understand the results of the decisions you make. Most people do not plan to fail, they fail to plan!